Stocks Trading Slightly Better Ahead of Fed Announcement
equity markets are trading flat to better ahead of this afternoonâ€™s Fed
interest rate policy announcement.Traders will most likely be focused on whether the Fed votes to extend
or end its mortgage buyback program as this will have a direct effect on the U.S.
If this announcement turns out to be a non-event, then
stocks could feel pressure as the focus will shift back to the possible
developing slowdown in the global economy.This news has been causing traders to take risk off the table as traders
seek shelter in lower risk assets.
Treasury futures are trading flat to higher. Look for
Treasury futures to rise if the Fed votes to extend its mortgage buyback
program.This stimulus measure has kept
pressure on interest rates.
The direction of February Gold will be dependent on the
direction of the Dollar. A stronger Dollar will put pressure on precious
metals. Any hint at higher interest rates is likely to drive the Dollar higher
and gold lower.A surprise announcement
about inflation will underpin gold, but this is a remote scenario.
March Crude Oil is under pressure overnight. Demand for
safer assets is pressuring commodities and stocks. Investors are focusing on a
possible slowdown in the global recovery which will lead to a drop in demand
for petroleum products.
The U.S. Dollar is trading flat overnight against most major
currencies ahead of this afternoonâ€™s Fed FOMC announcement.Many of the markets are trading inside of
yesterdayâ€™s ranges, driven primarily by position squaring as traders try to
assess the Fedâ€™s next move.
The consensus says the Fed is likely to acknowledge that
economic growth has accelerated since its last meeting in December but risks
still exist to the economy because of tight credit conditions and
unemployment.Based on the evidence that
the Fed is pouring over, look for interest rates to remain low for â€śan extended
periodâ€ť.The FOMC will continue to
economic data for signs of a sustained recovery that will stimulate jobs growth
without triggering high inflation.
Like previous FOMC meetings, the markets will focus on the
phase â€śan extended periodâ€ť. At this time, this probably means 6-9 months.Taking out this phrase or altering it will be
a signal that the Fed is getting ready to act sooner than previously estimated.
This news will move the markets substantially and most likely trigger a rally
in the Dollar while putting pressure on Treasury futures. Equity markets could
have a knee-jerk reaction to the downside before stabilizing.
Since its last meeting in December, a couple of regional Fed
presidents have gone on record expressing their concerns over the current
mortgage-backed securities program. This stimulus measure is expected to end on
March 31, but St. Louis Fed President Bullard wants to extend the program while
Philadelphia Fed President Plosser says it should end on time.
The mortgage buyback program has helped reduce mortgage
rates 0.25 to 0.75 which has helped stabilize the U.S. housing market.Ending the program prematurely could stall
the housing market recovery. The key is to end the stimulus measure without
knocking the housing market recovery off course.
The focus of this Fed announcement may shift from â€śwhenâ€ť
interest rates will begin to rise to will the Fedâ€™s ending of its mortgage
buyback program stifle the economy enough to knock the housing market off its
path to recovery. Traders should watch for a two-sided move following the
announcement as some traders will focus on the â€śextended periodâ€ť language while
other will focus on whether or not the Fed ends or extends its mortgage buyback
The March Euro is trading higher while sitting inside a
tight range. The recent bottom at 1.4027 was tested successfully. The current
chart pattern suggests the daily trend will turn to up following a breakout
The series of inside moves the past three days is likely to
make the March British Pound the most volatile market. For the past few days,
this market has been establishing support inside a series of retracement
levels. A strong breakout to the upside is likely to trigger a near-term rally
to 1.6351.A break to the downside
Demand for lower yields triggered by a possible slowdown in
the global economy continues to support the March Japanese Yen. Light buying
came in last night when this market tested a major 50% price level at 1.1227.
The March Swiss Franc is trading stronger after failing to
accelerate through the last swing bottom at .9530. In addition, this market is
nearing the December bottom at .9522.Both prices are potential breakout areas.On the upside, a new main top has been formed
at .9647.A trade through this level
will turn the main trend up on the daily chart.
The March Canadian Dollar is trading inside of yesterdayâ€™s
range, which could be a sign that downside momentum is weakening.A break through .9425 will be a sign that
this market is getting ready to rally after a prolonged move to the upside.
Crude oil, gold and equity markets could have a big influence on this market
today after the Fed announcement.
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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